What effect does a bankruptcy proceedings of a Real Estate Developer, in the real estate purchase agreements previously agreed upon in their statement of bankruptcy proceedings?

The buyers from real estate may be affected at some point by the bankruptcy proceedings that the Real Estate Developer, and we will have to keep an eye on the situation at the company in bankruptcy to see whether or not it will continue its operations.

Insolvency Proceedings

The purpose of the bankruptcy proceedings is to allow the company to continue its operations; this legal proceeding was designed for that purpose, so that the company could have a period during which no claims regarding its debts could be filed against it by the creditors and that, in exchange for temporarily suspending potential claims or agreeing to discounts and debt forgiveness, the company can be turned around and its operations continued.

One of the objectives of the business owner and the manager will be to continue the company's operations, the purpose of which is the promotion and sale of real estate, you may continue to perform these tasks within the framework of the contest from creditors without the achievement of the purpose of the activity of the Developer, which is the sale of the real estate that promotes or constructs [such a project], requires judicial authorization since it pertains to the company's business activities; and may only be required by the Bankruptcy Law judicial authorization in cases involving property or assets that constitute their estate and assets.

The first thing to note is that once the bankruptcy proceedings the following will not be affected: real estate purchase agreements with outstanding reciprocal obligations that must be fulfilled by both the debtor in bankruptcy and the buyer as provided for in Article 62.2 of the Insolvency Act.

The Developer in contest It will indeed be able to continue its operations, but:

What happens in the event of a breach of contract on your part, regarding the real estate purchase agreement?

In this case, it will be necessary to determine whether the breach of contract occurred while the contest from the Real Estate Developer, or whether it had occurred earlier, and this distinction is very important for the buyers because it will determine his status within the bankruptcy proceedings.

If the failure to comply with the Real Estate Purchase Agreement is caused by a failure to comply with the Real Estate Developer, while the bankruptcy proceedings are pending, the buyers they would find that, after filing the appropriate legal claim for a ruling and for benefits, they would obtain a declaration recognizing their claim against the estate in accordance with the provisions of Article 62.2 of the Bankruptcy Law.

This means that the amounts provided by the real estate buyers The costs associated with obtaining this judicial recognition shall be borne by the company as an expense arising from its activities during the contest and will be settled on a preferential basis, without being included on the list of creditors and, therefore, without the need to be subject to a collective bargaining agreement or to the consequences of the company's liquidation, should that ultimately occur.

If the breach of the real estate purchase agreement occurred before the declaration of the contest we would find that the buyers would become creditors, some creditors more, and they would be added to the list of creditors ordinary employees, and they would therefore be covered by any agreement signed, or their status would ultimately depend on the outcome of the company's liquidation in contest.

A motion to rescind a real estate purchase agreement in insolvency proceedings may therefore only be filed in the contest from creditors if the reason for the termination occurred after contest, but he will never be able to perform at a contest termination of a sales contract for a reason that occurred prior to contest.

Thus, by participating as just another creditor, it can be said that the contest of a Real Estate Developer places the buyer in a difficult situation and on an equal footing with others creditors with their contracts contingent on whether or not the company in bankruptcy proceedings can continue its operations; because if it cannot and the company is liquidated, the real estate buyers will be about creditors more.

Only the existence of a guarantee covering the amounts paid in advance can be the only satisfactory solution for the buyers that, as soon as the agreed-upon deadline for completion of the home is missed, they could demand that the bank or insurance company refund their money.

Fortunately, there are many complaints that Carlos Baño León's real estate attorneys in Alicante have successfully brought cases before the courts—not only in claims against banks but also against administrators from Real estate developers.

In the latter case, the buyer would no longer be a creditor of the Real Estate Developer and would disappear from the contest unless it had recognized other uninsured amounts or rights.

Could this have any impact on the rating of the contest the performance of the administrator of the company that failed to fulfill its obligation to provide a guarantee?

In my opinion, no, since these are different responsibilities; one is that of the administrator of the company in relation to the creditors in the context of the management and operation of the business, the liability for which would fall under the provisions of the Capital Companies Act, and, on the other hand, the liability that the buyer The owner of a residential property may require the manager of a company that did not guarantee the advance payments since this liability would fall under the liability imposed on him for violating a law on ius cogens and outside the scope of the company's economic activities

Thus, it is possible—and in fact has often happened—to secure a conviction against the administrator out of a sense of responsibility toward buyer and the simultaneous declaration of innocence in the indictment filed by the same prosecutor in the contest.

Our firm's experience in Carlos Baño León's Real Estate Lawyers in Alicante, in the contests big ones Real Estate Developers in the Valencian Community, has been that the vast majority of creditors homebuyers, either they had already obtained court rulings terminating their sales contracts or they were in the midst of legal proceedings, and the result for all of them has been that they have been incorporated as creditors ordinary employees and have been subject to the agreements that have been adopted, as well as to the settlements of the Real Estate Developers, which is what has happened in the vast majority of cases.

Real estate attorneys at Carlos Baño León's law firm in Alicante They have extensive experience in this field and throughout Spain, so we are here to assist you with any questions you may have regarding this area of law.